Brent oil forecast this week January 6-12: the price is likely to rally to $72.75

The current situation in the Middle East favours higher prices but let’s see what the charts project

The US ordered killing of Qassem Soleimani, head of Iran's elite Quds Force, has escalated tensions between the two nations, who were already at loggerheads. While Iran has threatened retaliation, the US has warned of any such move, stating that the US will hit 52 Iranian sites “very hard”.

Previous Middle East crises have generally proven to be positive for oil as the markets add in the risk premium. Therefore, oil markets are likely to remain bullish in the near future. If the tensions escalate further and grip the Middle East region in a conflict, oil prices are likely to surge further. The market participants should, therefore, keep a close eye on the news.

While the current situation favours higher prices, let’s see what the weekly chart and the daily chart project.

Brent oil price prediction chart: weekly

Brent oil prices had been range-bound between $67.50 and $55.73 for more than seven months. However, last week, the escalating tension between the US and Iran propelled the price above the overhead resistance at $67.50.

Both moving averages are sloping up and the RSI is in the positive territory, which suggests that the bulls have the upper hand. The next level to watch on the upside is $74.73. We anticipate the bears to defend this level aggressively.

If the price turns down from $74.73, it might dip to $67.50, which is likely to act as a strong support. On the other hand, if the bulls can propel the price above $74.73, a rally to $86.62 is also possible. While the long-term picture indicates that the bulls are back in the game, let’s analyse the daily chart to spot any buying opportunities.

Brent oil prediction chart: daily

On Friday, the bulls held on to the sharp rally and the price closed above the overhead resistance at $67.50. Both moving averages are sloping up and the RSI is in overbought territory, which suggests that bulls are in command.

The price can now move up to $72.75 and above it to $74.73. However, the overbought levels on the RSI indicate that the rally has been overdone in the short-term, hence, a pullback or a minor consolidation is possible.

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Any pullback is likely to find support at $67.50. If this support holds, it could offer a low-risk buying opportunity. Our bullish view will be invalidated if the bears sink the price below the 20-day EMA. However, we give it a low probability of occurring. How should the traders position themselves?

Brent oil price prediction for January 6-12: how to trade it

We do not suggest chasing the price higher. As the price is being driven by news, we suggest traders avoid large positional trades. It is better to take intraday trades on the long side, which can be closed following sharp rallies.

The traders can either enter on sharp intraday dips and ride the move higher or take breakout trades with close stop loss and ride the momentum. Even though the markets look overbought in the short-term, we do not suggest shorting it.

FURTHER READING: US drone strike kills Iran's General Qassem Suleimani

FURTHER READING: Oil may struggle to repeat 2019’s performance in 2020

FURTHER READING: Brent oil price forecast this week January 13 to 19: price could remain range-bound

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